Diversify to Survive
© 2002 Elena Fawkner
Over the past few weeks and months the news headlines have been
focused on Wall Street and the downward spiral of all of the
major stock indexes. As usual when one of these shake- outs
occurs, the popular media tries to reduce the issues to easy to
understand, bite-size morsels. A favorite strategy is to profile
a “typical” small investor who had all his eggs in one basket
when the market crashed and now his entire life savings are
nothing more than red ink on his personal balance sheet.
Had our typical small investor diversified his portfolio,
investing some of his capital in blue chip stocks, some in tech
stocks, some in property, some in bonds, chances are he would
still be in the black. The same can be said for anyone running
an online business. The online environment is so dynamic and
volatile, and so many so-called “hot” opportunities come and go
(and don’t do much in between), that devoting your entire
enterprise to just one product or service offering is nothing
short of dangerous, if not outright foolish.
The answer, then, is to place a few eggs in several baskets, so
if the bottom falls out of one, you can still make an omelet
with what’s left. In other words, diversify your product and
service offerings to generate multiple streams of income.
SOURCES OF INCOME
Here’s five ideas to get you started:
1. Affiliate programs. 2. Own products and services. 3. Website
advertising. 4. Ezine advertising. 5. Content access via
subscription.
We’ll look at each of these individually in a moment, but first,
one important caveat. The concept of multiple streams of income
does NOT mean you should rush out and add new products and
services to your repertoire willy-nilly.
Whatever you choose to offer must be closely related to the
subject matter of your site. If your site is about pet care,
don’t try and sell saucepans. To do so is not only a waste of
valuable time and other resources but you compromise the
integrity of your site’s purpose, not to mention your
credibility as an expert in your field.
But even more importantly than that, all traffic is not created
equal. Sure, if you create a separate page on your pet care
website just for your new saucepan line you may attract one or
two site visitors you may not have attracted otherwise. But
those visitors were interested in saucepans, not pet care. Once
they reach your site they’ll assume you’ve lost the plot and
click away faster than you can say “where’d he go?”.
Far, far better to have fewer site visitors who are all highly
interested and motivated by the subject matter of your site
(highly targeted traffic) than relatively more visitors who are
only somewhat interested and motivated (untargeted traffic).
The return on your investment will always be MUCH higher from
targeted traffic in the form of repeat visits, referrals,
recommendations and, of course, all-important sales.
OK, let’s turn now to the five sources of income.
AFFILIATE PROGRAMS
The first and most obvious source of income is affiliate
programs. I’m sure most of you are already well-familiar with
the concept but, if not, you can get a quick primer by reading
the article at http://www.ahbbo.com/affiliate.html .
To be effective as an income-generator, the affiliate programs
you choose should be closely related to the subject matter of
your site in the sense that a visitor interested in your website
content will also be interested in the subject matter of the
affiliate program you are promoting.
To start your search for appropriate affiliate programs, visit
http://www.associatesearch.com and/or http://www.refer-it.com .
OWN PRODUCTS
While affiliate programs are a good place to start, you are
working on commission. For significant, long-term, sustainable
income you need to develop your own line of products and
services. This does not necessarily mean you must personally
create the product or service; it just means you get to keep the
profits on any sale. You could, for example, sell products you
purchase from a wholesaler. Under this type of arrangement, you
buy the product for a certain price and sell it for a higher
price. The difference is your profit. The profit under this type
of arrangement will, 99% of the time, be significantly higher
than the commission income you generate with affiliate programs.
If you don’t want to bother with the hassle of storing inventory
and shipping orders, make arrangements for the wholesaler to
drop-ship orders to your customers instead.
Of course, you can always create your own products as well. A
good option for an online business is a digital product such as
an e-book since production and distribution costs are extremely
low. Your customer simply downloads the product from your server
to her hard disk. But you don’t have to restrict yourself to
digital products. You might choose to write a book and have it
professionally bound and printed. Or you may choose to make your
book available in both digital and traditional format with
different price points to reflect the different production and
shipping costs.
WEBSITE ADVERTISING
Once you have generated consistently high, targeted traffic to
your website, you can begin to think about charging for third
party advertising on some of your website real estate. The price
you can charge for banner advertising depends on your traffic
whether your advertiser pays you to simply host his banner or
whether she pays you per click-through. Particularly if your
revenue depends on click-through it is very important (both for
you and your advertiser in terms of repeat business) that your
advertiser’s product or service is relevant to the overall
subject matter of your website.
Your pricing would generally be set at a CPM rate, for example
$20 per thousand page views. So, if your site receives 5,000
page views a week, that’s $100 a week in advertising revenue.
The more targeted your traffic, the more you can charge as your
CPM.
EZINE ADVERTISING
You have, I’m sure, heard it said many times that a great way to
generate traffic to your website is to publish an ezine
(electronic magazine or newsletter). That’s certainly true.
Ezines are a terrific traffic generator. But they can also be a
source of revenue in their own right.
Once you hit 1,000 subscribers (as a general rule) you can start
charging for advertising in your ezine. Again, CPM is a good
pricing model to start with.
Again, the more targeted your subscriber database, the higher
your CPM. Some very highly targeted, specialized ezines can
charge as much as $40 CPM or more. Others that are very general
and untargeted may only be able to generate $2 CPM. Again, the
time and effort you expend in targeting your market audience,
the higher your potential revenue.
CONTENT ACCESS
The number one commodity people are looking for online is
information. Consider making your website content available on a
members-only basis, charging a membership fee for access. Your
content has to be of genuine value to your website visitors,
however. Don’t try this if all you’re offering is a collection
of other people’s articles.
The type of content that lends itself well to this type of
arrangement includes things like apartments for rent listings
(eg http://www.westsiderentals.com ), home-based job openings,
that sort of thing.
Members-only sites that consist of a collection of freely
available products and tools can also work well if, by joining,
the member saves him or herself many hours of independent
searching and collating the relevant materials.
Apart from information, entertainment-type content also lends
itself well to a pay-for-access type of arrangement. The obvious
(if unfortunate) example is the highly lucrative internet
pornography industry. Say what you will about it, it is a
business model that most online entrepreneurs would love to be
able to replicate in their own industry, if only they could
generate the same level of interest. It’s that targeted traffic
principle yet again!
As I said, these are just a few ideas to get you started. Once
you start implementing these, others will suggest themselves to
you. It really doesn’t matter what you do so long as it works
for you. By all means, if something works well, don’t stop what
you’re doing. But don’t rest on your laurels either. Make sure
you always have other wells to drill if today’s runs dry.
——
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——
Elena Fawkner is editor of A Home-Based Business Online …
practical business ideas, opportunities and solutions for the
work-from-home entrepreneur. http://www.ahbbo.com